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Marjorie Kelly Speaks at Harvard Law

Marjorie Kelly, Senior Associate at the Tellus Institute, speaks today at Harvard Law School. The event is sponsored by SICKLE (Jon Hanson’s Corporate Law Class),

Title: “What Comes Next? The demise of shareholder primacy and the seeds of new corporate design.”When: Wednesday, April 6, 12:15-1:15 PMWhere: Langdell South

Here’s a bio of Marjorie Kelly:

Marjorie Kelly is a modern revolutionary who wants to democratize economics. She argues that our current economic system is an aristocracy run by corporations that pay shareholders as much as possible and employees as little as possible—while ignoring the public good. CEOs aren’t all bad guys, Kelly says, they’re just operating in a system that forces them to put profits above everything else. That’s what she aims to change with her groundbreaking book, The Divine Right of Capital, which offers ideas on how to move toward a more humane, democratic corporate design.

Kelly’s book is already a modern classic that reveals the mechanisms that lead capitalism to create social ills. She shows how the wealth gap, corporate welfare, and industrial pollution are merely symptoms; the real illness is shareholder primacy—the corporate drive to create more wealth for the rich, regardless of the cost. She says that 99 percent of “investing” is speculation benefiting the financial elite, not small investors.

Ordinary citizens can spur change, Kelly says, by pushing for reform on laws that govern the way corporations operate. “We must design a corporate system in which all economic rights are equally protected, not only the rights of shareholders,” Kelly says. To that end, she advocates two key areas of reform: requiring corporations to be responsible to the public good, and putting more wealth into the hands of those who generated it—the employees.

Kelly isn’t a dreamy-eyed idealist. She is the co-founder and editor of Business Ethics, a leading publication on socially responsible business, and a Missouri-born, third-generation entrepreneur (her grandfather started Anderson Tool & Die in his basement during the Depression). David Korten, author of When Corporations Rule the World, calls Kelly “our Thomas Paine for the new millennium.”

One Response to “Marjorie Kelly Speaks at Harvard Law”

Robertsaid

It’s useful for public discourse to have a left wing that knows what it’s talking about, but the fact that in 2011 a top leftist intellectual thinks shareholder primacy is the problem with capitalism shows that elite leftists can’t make good arguments even when they’re generally correct.

A much bigger problem in recent years has been executives who are not accountable to shareholders and create externalities while looting their own companies. Are we in a recession because AIG, Bear Stearns, Countrywide, and all the other Wall Street firms were headed by well-meaning CEOs who grudgingly felt the need to raise long term share prices? Were BP’s shareholders well-served by reckless drilling? Remember what happened to Enron’s shareholders? Does anyone recall the last recession from the dot com bubble collapse, caused by pets.com and its voracious pursuit of profit?

American corporate governance rules, set by the government, essentially allow executives to set their own salaries, and large bonuses and golden parachutes are incentives to maximize profits and share prices over very short term horizons, shareholders and everyone else be damned.

Liberals claim to be concerned about economic inequality. Executive pay has skyrocketed over the last 30 years, but in Europe and Japan successful companies like Toyota pay their top leaders an order of magnitude less American companies. Paying above market rates obviously does not lead to profit maximization for shareholders.

The easiest way to bring top salaries into line would be to rewrite corporate governance rules so that shareholders have a binding vote on executive pay, only counting votes that are submitted, unlike the current system in which companies control unreturned proxy votes. A CEO who wants $50 million would have to explain why he is worth 50 times more than his counterpart in Germany who is running a more profitable company. Once on the job he would have to think about keeping the company operating until his retirement, instead of taking a big a short term risk pursuing a bonus. This rule change would be a simple reform that would require no taxes or regulatory burden, and would do more to decrease income inequality than almost any other policy imaginable. Notice however that it goes in the exact opposite direction of this post, because shareholders would gain more control over their companies.

Where do liberals stand on this? Right now corporate boards are a big part of the problem. They are usually handpicked by management, and given legalized bribes of several hundred thousand dollars to show up for a few meetings a year in return for formally allowing executives to treat their companies like piggy banks. Yes, liberals are furious about corporate boards…because there needs to be more gender quotas for women, according to The Situationist. From the New Deal through the 1950s liberals appealed to regular Americans because they actually had their best interests in mind, but today more people can see through the elitism, identity politics, and status striving that culminated in this disgraceful president.